CONTENT v What is a command economy v

CONTENT v What is a command economy ? v Fife Characteristics of a Command Economy v Advantages v Disadvantages v Examples v Bibliography

What is a command economy ? A command economy is where a central government makes all economic decisions. The government or a collective owns the land the means of production. It doesn't rely on the laws of supply and demand that operate in a market economy. A command economy also ignores the customs that guide a traditional economy.

Fife Characteristics of a Command Economy 1. The government creates a central economic plan. The five-year plan sets economic and societal goals for every sector and region of the country. Shorter-term plans convert the goals into actionable objectives. 2. The government allocates all resources according to the central plan. It tries to use the nation's capital, labor and natural resources in the most efficient way possible. It promises to use each person's skills and abilities to their highest capacity. It seeks to eliminate unemployment.

3. The central plan sets the priorities for the production of all goods and services. These include quotas and price controls. Its goal is to supply enough food, housing, and other basics to meet the needs of everyone in the country. It also sets national priorities. These include mobilizing for war or generating robust economic growth. .

4. The government owns monopoly businesses. These are in industries deemed essential to the goals of the economy. That usually includes finance, utilities, and automotive. There is no domestic competition in these sectors. 5. The government creates laws, regulations, and directives to enforce the central plan. Businesses follow the plan's production and hiring targets. They can't respond on their own to free market forces

ADVANTAGES Planned economies can quickly mobilize economic resources on a large scale. They can execute massive projects, create industrial power, and meet social goals. They aren't slowed down by lawsuits from individuals or environmental impact statements. Command economies can wholly transform societies to conform to the government's vision. The new administration nationalizes private companies. Its previous owners attend "re-education" classes. Workers receive new jobs based on the government's assessment of their skills.

Disadvantages This rapid mobilization often means command economies mow down other societal needs. For example, the government tells workers what jobs they must fulfill. It discourages them from moving. The goods it produces aren’t always based on consumer demand. But citizens find a way to fulfill their needs. They often develop a shadow economy, or black market. It buys and sells the things the command economy isn't producing. Leaders' attempts to control this market weakens support for them.

Command economies discourage innovation. They reward business leaders for following directives. This doesn’t allow for taking the risks required to create new solutions. Command economies struggle to produce the right exports at global market prices. It's challenging for central planners to meet the needs of the domestic market.

EXAMPLES China - After World War II, Mao Tse Tung created a society ruled by Comunsim. He enforced a strictly planned economy. The current leaders are moving toward a market-based system. They continue to create five-year plans to outline economic goals and objectives. Russia In 1917, Vladimir Lenin created the first Communist command economy. Josef Stalin built up military might and quickly rebuilt the economy after World War II. The Soviet State Planning Committee has been the most studied command economy entity. The USSR was also the longest running command. Then, the state transferred ownership of the largest companies to oligachrs.

Bibliography � Bon Kristoffer G. Gabnay, Roberto M Remotin, Jr. , Edgar Allan M. Uy, editors. Economics: Its Concepts & Principles. 2007. Rex Book Store: Manila � https: //www. thebalance. com

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